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Argentina: Populism on the Run

March 12, 2018

The international community has long been skeptical about Argentina’s prospects, and Argentina has more than earned that mistrust. Its boom-and-bust trajectory over the past decades has been legendary, spawning a sub-discipline of “what-went-wrong” historical research. Strolling amid the nineteenth-century grandeur of Buenos Aires, it is easy to imagine that Argentina remains one of the world’s 10 richest countries, but the illusion is quickly shattered by the capital’s sprawling slums, in a land where one in three inhabitants now lives in poverty.

Nor has Argentina shed its perilous addiction to populism. Following its 2001 economic crisis, Argentina was governed for more than a decade by Néstor Kirchner and later his widow, Cristina Fernández de Kirchner. The couple inherited a country on its knees, and despite a global commodities boom, they left the country on the verge of another collapse, burdened by ruinous inflation, a giant deficit, and depleted foreign exchange reserves.

Despite this discouraging record, the last two years have given reason to hope Argentina might have finally turned a corner. The country has always had a rich endowment of natural and human resources. Now, President Mauricio Macri and his Cambiemos (Let’s Change) coalition are creating a foundation for sustainable growth, designed to dismount Argentina from its economic and political roller coaster.

To do so, Macri is pursuing gradual, though still groundbreaking, reforms to Argentina’s policies, laws, and institutions, such as sharp reductions in subsidies for energy and transportation that have drained public resources. At the same time, the government has maintained social programs and declared the reduction of poverty to be its highest priority. As a result, Macri’s approval rating remains around 50 percent—a stunningly high level, given the austerity policies he has implemented.

“We are moving in the right direction,” Macri said in his annual speech marking the opening of Congress on March 1, “moving past many years of paralysis and backsliding.”

Yet the future of Argentina’s reform agenda is uncertain. The government’s sensible distaste for shock therapy is complicating its battle against inflation and producing a rapidly growing national debt. Many other challenges remain unaddressed, as the government takes aim at some of the most protected sectors in the economy. Its attempts at labor reform are faltering. But only deep labor reforms can make the country competitive again. The government’s battles with corrupt union bosses are only beginning now and are already provoking massive protests, as well as strikes like those by public school teachers that began on March 5 and have prevented the reopening of schools after summer break in 17 of the country’s 24 provinces. If one takes the president’s most senior advisers at their word, his intention is ultimately to break the unions’ stranglehold on many of the country’s sectors, including health, education, transport, and others. What the president has in mind is to promote a fundamental change in Argentina’s political culture, a process that will take many years, but which many of the country’s most astute observers believe is absolutely essential if Argentina is ever to break its boom-and-bust populist cycle.

Macri knew what he was getting into when he ran for president in 2015. But given the stakes for both Argentina and the region, he should not bear this burden alone.

Should Argentina succeed, it will demonstrate a path away from populism and show that pro-market, pro-trade policies and a smart link of Argentina to the global digitalized economy—complemented by infrastructure investment and social spending—offer the best path to sustainable growth and shared prosperity.

For that reason, the international community must help Argentina in whatever way it can.

That’s what we’re doing.

One year ago, the Center for Strategic and International Studies (CSIS), in Washington, launched the Argentina-U.S. Strategic Forum, an innovative private-public platform designed to strengthen the foundations of the U.S.-Argentina relationship and ensure that cooperation is not interrupted by leadership changes in either country. In its first year, the Forum has helped Argentina deepen its engagement with global organizations such as the Organization for Economic Cooperation and Development and the G20, promote greater participation of women in the technology sector, develop sound trade policies, address key global health challenges, and strengthen Argentina’s world-class agro-industrial sector.

Last September, the Woodrow Wilson International Center for Scholars, also in Washington, launched a new project exclusively dedicated to the study of Argentina. The Wilson Center’s Argentina Project is providing expert analyses of Argentina’s reform opportunities and challenges and serving as a resource for private-sector actors intrigued by Argentina’s improving investment climate. Both the Argentina Project and the Strategic Forum are working with members of the U.S. Congress to build new bridges between the Argentine and U.S. governments.

Now, the Strategic Forum and Argentina Project plan to coordinate their complementary activities to help ensure that Argentina succeeds in strengthening its democratic institutions, promoting transparency, improving security, and achieving sustainable and inclusive economic growth. On March 13, at the annual meeting of the Strategic Forum in Washington, the Wilson Center’s Argentina Project will be an official participant, as the two organizations strengthen and expand their efforts by engaging with senior Argentine and U.S. government officials and private-sector leaders.

This partnership shows our recognition of the promise of this moment in Argentine history—and also its fragility. As we generate and contribute insights to support Argentina’s transition, we hope the international community does the same.

Michael Matera is a senior fellow and director of the Americas Program at the Center for Strategic and International Studies in Washington, D.C. Benjamin Gedan is a public policy fellow at the Wilson Center. Both Matera and Gedan worked in the past as senior U.S. government officials responsible for Argentina at the U.S. embassy in Buenos Aires and at the State Department as well as the National Security Council.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).